Quarterly Report • May 16, 2018
Quarterly Report
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The Board of Directors of May, 14th 2018
| 1 | THE COMPANY B&C SPEAKERS S.P.A. – CORPORATE BODIES 3 | |
|---|---|---|
| 2 | INTRODUCTION 4 | |
| 3 | THE MAIN ASPECTS OF THE PERIOD FROM JANUARY TO MARCH 2017 4 | |
| 4 | RESULTS OF OWNERSHIP STRUCTURE, ASSET MANAGEMENT AND FINANCIAL MANAGEMENT…………………………………………………………………………………………………………4 |
|
| 5 | STATEMENT OF CHANGES IN EQUITY 10 | |
| 6 | NET FINANCIAL POSITION 111 | |
| 7 | SIGNIFICANT EVENTS OCCURRING AFTER 31 MARCH 2018 11 | |
| 8 | OUTLOOK FOR THE ENTIRE YEAR 2018 11 | |
| 9 | SHARE PERFORMANCE ERRORE. IL SEGNALIBRO NON È DEFINITO. |
- BALANCE SHEET AND CONSOLIDATED INCOME STATEMENT RELATING TO MARCH, 31 2018 ..................................................... ERRORE. IL SEGNALIBRO NON È DEFINITO.
- CERTIFICATION OF FINANCIAL REPORTING MANAGER PURSUANT TO ARTICLE 154-BIS, PARAGRAPH 2 OF LEGISLATIVE DECREE NO. 58/1998. ........ ERRORE. IL SEGNALIBRO NON È DEFINITO.
| Chairperson: | Gianni Luzi |
|---|---|
| Chief Executive Officer: | Lorenzo Coppini |
| Director: | Simone Pratesi |
| Director: | Alessandro Pancani |
| Director: | Francesco Spapperi |
| Indipendent Director: | Raffaele Cappiello |
| Independent Director: | Roberta Pecci |
| Independent Director: | Gabriella Egidi |
| Independent Director: | Patrizia Mantoan |
| Chairmen: | Riccardo Foglia Taverna |
|---|---|
| Regular Auditor: | Giovanni Mongelli |
| Regular Auditor: | Sara Nuzzaci |
PricewaterhouseCoopers S.p.A.
The Interim Report at 31 March 2018 has been prepared pursuant to Legislative Decree 195/2007 and article 154 ter of the T.U.F.; the economic and financial aggregates shown below, even if determined on the basis of IFRS and in particular the same measurement criteria used for the preparation of the consolidated financial statements as at 31 December 2015, do not represent an interim financial statement prepared in accordance with I.F.R.S. and in particular with IAS 34.
This interim report has not been subjected to audit.
At the date of preparation of this report, official data indicate the following significant shareholders
This Interim Report at 31 March 2018 contains the information required by art. 154 ter of the TUF.
The IFRS accounting standards used by the Group are the same as those applied in the preparation of the financial statements for the year ended 31 December 2017, to which reference should be made.
In particular, as required by IFRS, a provision was made for the carrying out of estimates and the formulation of assumptions, which are reflected in the determination of the carrying amounts of assets and liabilities, including potential assets and liabilities at the end of the period. These estimates and assumptions are used specifically for determining amortisation and depreciation, impairment testing of assets (including the measurement of receivables), provisions, employee benefits, deferred tax assets and liabilities. The final results could therefore differ from these estimates and assumptions; moreover, the estimates and assumptions are reviewed and updated periodically and the effects of each change are immediately reflected in the financial statements.
Below are the financial statements and the explanatory notes to the statements. All values are expressed in euros, unless otherwise indicated. The financial and economic data presented, are compared with the corresponding figures of 2017.
These financial statements, prepared in accordance with the requirements of art. 154 ter of the TUF, report the positive and negative components of income, the net financial position, divided between short, medium and long term items, as well as the Group's financial position. In view of this, the financial statements presented and the relative explanatory notes, were prepared for the sole purpose of compliance with the provisions of the aforementioned Issuer Regulations, are devoid of certain data and information that would be required for a complete representation of the financial position and the results of the Group for the quarter ended at 31 March 2017 in accordance with IFRS.
B&C Speakers is a key international entity in the production and marketing of "top quality professional loudspeakers"; owing to the nature and type of business carried on, the Group operates exclusively in this sector, both nationally and internationally.
Products are manufactured and assembled at the Italian production plant of the Parent Company and the subsidiary Eighteen Sound S.r.l., which also deals directly with marketing and sales in the various geographical areas covered.
Distribution in the US market is handled through the American subsidiary B&C Speakers NA LLC, which also offers support services for sales to local customers.
Distribution in the Brazilian market is handled through the subsidiary B&C Speakers Brasil LTDA.
Below is the table showing the Group's economic performance during the first three months of 2018 compared with the figures for the same period of 2017.
| $(\epsilon$ thousands) | 1 Q 2018 YTD | Incidence 1 Q 2017 YTD | Incidence | |
|---|---|---|---|---|
| Revenues | 12.931 | 100,00% | 9.419 | 100,0% |
| Cost of sales | (7.884) | $-60,97%$ | (5.418) | $-57,5%$ |
| Gross margin | 5.047 | 39,03% | 4.001 | 42,5% |
| Other revenues | 115 | 0,89% | 28 | 0,3% |
| Cost of indirect labour | (884) | $-6,83%$ | (548) | $-5,8%$ |
| Commercial expenses | (250) | $-1,94%$ | (204) | $-2,2%$ |
| General and administrative expenses | (1.267) | $-9,80%$ | (996) | $-10.6%$ |
| Ebitda | 2.761 | 21,35% | 2.281 | 24,2% |
| Depreciation of tangible assets | (272) | $-2,1196$ | (190) | $-2,0%$ |
| Amortization of intangible assets | (75) | $-0,58%$ | (7) | $-0,1%$ |
| Writedowns | (6) | $-0.05%$ | (3) | 0.0% |
| Earning before interest and taxes (Ebit) | 2.407 | 18,62% | 2.082 | 22,1% |
| Financial costs | (168) | $-1,30%$ | (51) | $-0,5%$ |
| Financial income | 129 | 1,00% | 147 | 1,6% |
| Earning before taxes (Ebt) | 2.368 | 18,31% | 2.178 | 23,1% |
| Income taxes | (696) | $-5,38%$ | (639) | $-6,8%$ |
| Profit for the year | 1.672 | 12,93% | 1.540 | 16,3% |
| Minority interest | $\mathbf{0}$ | 0.00% | $\Omega$ | 0,0% |
| Group Net Result | 1.672 | 12,93% | 1.540 | 16,3% |
| Other comprehensive result | (14) | $-0,11%$ | 17 | 0,2% |
| Total Comprehensive result | 1.659 | 12,83% | 1.556 | 16,5% |
Some financial indicators and some reclassified financial statements not defined by the IFRS are presented and commented on in this financial statement.
These figures are defined below in compliance with the Consob Communication of July 28, 2006 (DEM 6064293) and subsequent amendments and additions (Consob Communication No. 0092543 of December 3, 2015, which incorporates the ESMA / 2015/1415 guidelines).
The alternative performance indicators listed below shall be used as an informative supplement to the provisions of the IFRS to assist the users of the financial report with a better understanding of the Company's economic, equity and financial performance. The alternative performance indicators are measures used by the Issuer to monitor and evaluate the performance of the Group and are not defined as accounting measures, either in the Italian Accounting Principles or in the IAS / IFRS. Therefore, the determination criterion applied by the Group may not be homogeneous with the one adopted by other operators and/or Groups and therefore may not be comparable. It is emphasized that the method of calculation of these corrective measures used by the Company is consistent over the years.
EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) is defined by the Issuer's Directors as the "profit before tax and financial income and expenses", as resulting from the consolidated income statement, gross of amortisation of intangible fixed assets, depreciation of tangible fixed assets, provisions and impairment, as shown on the above consolidated income statement. EBITDA is a measure used by the Issuer to monitor and assess the Group's operating performance.
EBITDA adjusted (Earnings Before Interest, Tax, Depreciation and Amortisation) is defined by the Issuer's Directors as the "profit before tax and financial income and expenses", as resulting from the consolidated income statement, gross of amortisation of intangible fixed assets, depreciation of tangible fixed assets, provisions and impairment and acquisition costs of Eighteen Sound, as shown on the above consolidated income statement. EBITDA is a measure used by the Issuer to monitor and assess the Group's operating performance.
EBIT (Earnings Before Interest and Tax) is the consolidated result before tax, charges and financial income as recorded in the income statement prepared by the Directors in drawing up the IAS/IFRS-compliant financial statements.
EBT (earnings before taxes) is the consolidated result before tax, as recorded in the income statement prepared by the Directors in preparing IAS/IFRS-compliant consolidated financial statements.
In the first three months of 2018 amounted to Euro 12.93 million, resulting in growth of 37.28% over the same period of 2017 when turnover stood at Euro 9.42 million.
This significant increase was the result of the 8.7% growth achieved by the B&C Speakers Group when the scope of consolidation is held constant, to which was added the turnover achieved by Eighteen Sound which provided a net contribution of Euro 2.6 million.
During the period, thanks also the effects of the acquisition, the Group heavily increased turnover in all operating areas. In particular we note the significant growth in the European market (+36% with sales of Euro 6.3 million) and in the Latin American market (+167% with sales of Euro 1.3 million).
Below is a full breakdown for the first quarter of 2018 by geographic area:
| Revenues per geographic area (values in Euro/thausand) |
1 Q 2018 YTD | % | 1 Q 2017 YTD | % | Difference | Difference % |
|---|---|---|---|---|---|---|
| Latin America | 1.250 | 10% | 468 | 5% | 782 | 167% |
| Europe | 6.312 | 49% | 4.635 | 49% | 1.677 | 36% |
| Italy | 1.013 | 8% | 659 | 7% | 354 | 54% |
| North America | 2.385 | 18% | 2.027 | 22% | 358 | 18% |
| Middle East & Africa | 70 | 1% | 97 | 1% | (27) | -28% |
| Asia & Pacific | 1.900 | 15% | 1.533 | 16% | 367 | 24% |
| Total | 12.931 | 100% | 9.419 | 100% | 3.512 | 37% |
During the first three months of 2018 had an increased impact on revenues compared to the first three months of 2017, rising from 57.52% to 60.97%.
The greater impact of the Cost of Sales with respect to revenues was due to the inclusion of the subsidiary Eighteen Sound within the scope of consolidation, which at present still has margins which are much lower than those traditionally associated with B&C Speakers. The positive effects deriving from the integration of the two structures, mainly associated with synergies in acquisitions and production, will be progressively seen during the year and will be fully achieved during 2019.
Costs for indirect personnel increased in both absolute terms and in terms of impact on turnover. This increase can mainly be attributed to the acquisition of Eighteen Sound.
Commercial expenses showed no significant changes compared to the first three months of the previous year. Consequently, their impact remained essentially unchanged.
General and administrative costs increased in a manner less than proportional to the increase in Group sales, essentially due to greater production volumes following the acquisition.
Mainly as a result of the trends described above, EBITDA in the first three months of 2018 amounted to Euro 2.76 million, an increase of 21.03% over the same period of 2017 (when the amount was Euro 2.28 million).
The EBITDA margin relative to the first three months of 2018 (equal to 21.35% of revenues in the first quarter of 2018 and to 24.22% in the first three months of the previous year) is due to the combined effects of the increase in volumes and the consolidation of Eighteen Sound that still has lower margins with respect to B&C Speakers.
The depreciation and amortisation of tangible and intangible assets are stable compared to the corresponding period of the previous year due to the combined effect of the natural conclusion of the amortization process of existing assets and of the investment activity carried out in the first three months of 2018, essentially aimed at improving production plants.
EBIT referred to the first three months of 2018 amounting to 2.37 million euros, an increase of 8.71% compared to the same period of 2017 (when it was equal to 2.18 million euros). The EBIT margin is equal to 18.31% of revenues (23.13% in the corresponding period of 2017).
The Group's net profit at the end of the first three months of 2018 amounted to Euro 1.67 million and represents 12.93% of consolidated revenues with a total increase of 8.63% with respect to the corresponding period of 2017; the procedure for the application of the Patent Box, from which a substantial reduction in the corporate tax rate is expected, is in its final phase.
The Group's financial stability continues to be good, unchanged with respect to the end of 2017. The Net Financial Position at the end of the first quarter of 2018 was negative and equal to Euro 6.64 million.
The balance sheet figures for the year ended March 31, 2018 compared with the balance sheet values at the end of 2017 are shown below.
| Reclassified Balance sheet | 31 March | 31 December | |
|---|---|---|---|
| (€ thousands) | 2018 | 2017 | Change |
| Property, plant & Equipment | 3.653 | 3.918 | (265) |
| Inventories | 12.404 | 13.216 | (811) |
| Trade receivables | 12.810 | 11.253 | 1.557 |
| Other receivables | 1.937 | 2.143 | (207) |
| Trade payables | (4.805) | (6.129) | 1.323 |
| Other payables | (2.171) | (1.957) | (214) |
| Working capital | 20.174 | 18.526 | 1.648 |
| Provisions | (863) | (843) | (20) |
| Invested net working capital | 22.965 | 21.601 | 1.364 |
| Cash and cash equvalents | 6.365 | 4.411 | 1.954 |
| Investments in associates | 50 | 50 | - |
| Goodwill | 2.318 | 2.318 | - |
| Short term securities | 5.725 | 5.174 | 551 |
| Other financial receivables | 568 | 568 | (0) |
| Financial assets | 15.026 | 12.522 | 2.505 |
| Invested net non operating capital | 15.026 | 12.522 | 2.505 |
| NET INVESTED CAPITAL | 37.991 | 34.122 | 3.869 |
| Equity | 19.260 | 17.814 | 1.446 |
| Short-term financial borrowings | 7.561 | 5.789 | 1.772 |
| Long-term financial borrowing | 11.170 | 10.519 | 651 |
| RAISED CAPITAL | 37.991 | 34.122 | 3.869 |
Fixed assets: are defined by the Issuer's Directors as the value of long-term assets (tangible and intangible). Net Operating Working Capital: is defined by the Issuer's Directors as the value of inventories, trade receivables and other receivables net of debts for supplies and other payables. Funds: the value of bonds linked to employees' and directors' severance pay. Invested net working capital: is the value of financial assets and other financial credits as described above. Raised capital: is the value of net assets of the Group and the total indebtedness of the Group.
A number of comments on the classification of assets and liabilities according to their operational destination are showed here below.
Net Operating Invested Capital shows a decrease of € 1.3 million compared with 31 December 2017. This increase was mainly due to the combined effect of the following factors:
Net Non-Operating capital showed an increase of around € 2.5 million compared to 31 December 2017, primarily due to the increase in Group liquidity (of about +1.9 million of Euro) and Short term securities (about +0.6 million of Euro).
The other Capital categories showed no significant changes compared with 31 December 2017.
Changes in net equity reserves of the Group during the first three months of 2018 are attributable primarily to the balance of Treasury shares (negative as a result of purchases made in the period) and to the period positive result. It should be noted, however, that the decrease in share capital is due to IFRS-compliant handling of trading of Treasury shares.
Net Financial Position as of March 31st 2018 was great and equal to 6.6 million of Euro, substantially in line with the 6.7 million euros reached at the end of 2017.
The Short-term financial debt of € 7.5 million is represented by € 5.6 million of the short-term portion of loans taken out by the Parent Company and € 1.9 million of bank overdrafts.
Financial debt in the medium/long term equal to € 1,5 million is made up of the long-term portion of the loans contracted by the parent company (€ 1,4 million relating to long-term financing granted by Cassa di Risparmio di Firenze, € 0,1 thousand regarding the SIMEST loan.
Medium/long-term financial debt of € 11.2 million is represented by the medium-term portion of loans taken out by the Parent Company.
Below is the statement of changes in equity from 1 January 2018 to 31 March 2018 (figures in thousands of Euro):
| Share Capital |
Legal Reserve |
Share premium reserve |
Extraordinary reserve |
Exchange rate reserve |
Foreign exchange reserve |
Riserve di risultato |
Net Group Equity |
Minority interest |
Total net Equity | |
|---|---|---|---|---|---|---|---|---|---|---|
| Euro thousand | ||||||||||
| Balance December 31, 2017 | 1.097 | 379 | 4.786 | 44 | 54 | 435 | 11.019 | 17.814 | - | 17.814 |
| Result of the period | 1.673 | 1.673 | 1.673 | |||||||
| Other comprehensive income/expenses | (14) | - | (14) | (14) | ||||||
| Totale other comprehensive income/expenses | - | - | - | - | - | (14) | 1.673 | 1.659 | - | 1.659 |
| Shareholders | ||||||||||
| Allocation of previous year result | - | - | - | - | ||||||
| Dividend distribution | - | - | - | |||||||
| Treasury shares allocation | (2) | (212) | - | (214) | (214) | |||||
| Balance March 31, 2018 | 1.095 | 379 | 4.574 | 44 | 54 | 421 | 12.692 | 19.260 | - | 19.260 |
Below is the Net Financial Position table prepared in line with that reported in the consolidated financial statements as at 31 December 2017 (figures in thousands of Euro).
| 31 March | 31 December | |||
|---|---|---|---|---|
| Values in Euro Thousands | 2018 | 2017 | Change % | |
| A. Cash | 6.365 | 4411,4 | 44% | |
| C. Securities held for trading | 5.725 | 5.174 | 11% | |
| D. Cash and cash equivalent (A+C) | 12.090 | 9.586 | 26% | |
| F. Bank overdrafts | (1.926) | (1.443) | 33% | |
| G. Current portion of non current borrowings | (5.634) | (4.346) | 30% | |
| I. Current borrowingse (F+G) | (7.561) | (5.789) | 31% | |
| J. Current net financial position (D+I) | 4.529 | 3.797 | 19% | |
| K. Non current borrowings | (11.170) | (10.519) | 6% | |
| N. Non current borrowings | (11.170) | (10.519) | 6% | |
| O. Total net financial position (J+N) | (6.640) | (6.722) | -1% |
Note: The net financial position, calculated by the Parent Company management as detailed above, is not identified as an accounting measurement under the Italian Accounting Standards or the IFRSs endorsed by the European Commission. Therefore, the measurement criteria may not be consistent with that adopted by other operators and/or groups and may, therefore, not be comparable. Moreover, the definition may differ from that established by the Issuer's loan contracts.
Net Financial Position shows, as previously stated, a substantial consistency compared to December, 31 2017.
The Shareholders' Meeting, held on 26 April 2018, resolved the issue of an ordinary dividend of € 0.42 per ordinary share in circulation at the coupon detachment date (April, 30, 2018, record date on May 2, 2018 and payment on May 3, 2018). The ordinary dividend up with respect to the forty cents seen in 2017. It should be noted that the shareholders also renewed the corporate bodies.
At the same time, the first positive signs relative to growth in orders received by the subsidiary Eighteen Sound were seen. After the year largely began with uncertainty relative to the transfer of ownership, the market reacted positively and during the last two months the Company has received new orders totalling Euro 2.75 million, decidedly higher than the forecasts.
The available data, as at the date this document was prepared, suggests that 2018 will be a year of significant growth for the B&C Speakers Group.
Below is a table showing the share performance from January, 1 2018 to the date of preparation of this document (source: Borsaitaliana.it).
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Values in Euro) |
31 March 2018 |
31 December 2017 |
|
|---|---|---|---|
| ASSETS | |||
| Fixed assets | |||
| Tangible assets | 3.116.626 | 3.318.310 | |
| Goodwill | 2.318.181 | 2.318.181 | |
| Other intangible assets | 536.526 | 599.748 | |
| Investments in non controlled associates | 50.000 | 50.000 | |
| Deferred tax assets | 468.131 | 352.514 | |
| Other non current assets | 567.992 | 568.135 | |
| related parties | 88.950 | 88.950 | |
| Total non current assets | 7.057.456 | 7.206.888 | |
| Currents assets | |||
| Inventory | 12.404.180 | 13.215.651 | |
| Trade receivables | 12.809.925 | 11.252.674 | |
| Tax assets | 883.376 | 1.297.287 | |
| Other current assets | 6.310.273 | 5.667.487 | |
| Cash and cash equivalents | 6.364.898 | 4.411.203 | |
| Total current assets | 38.772.652 | 35.844.302 | |
| Total assets | 45.830.108 | 43.051.190 | |
| LIABILITIES | 31 March 2018 |
31 December 2017 |
|
| Equity | |||
| Share capital | 1.094.947 | 1.096.845 | |
| Other reserves | 5.052.164 | 5.262.923 | |
| Foreign exchange reserve | 420.842 | 435.600 | |
| Retained earnings | 12.692.357 | 11.019.113 | |
| Total equity attributable to shareholders of the parent | 19.260.310 | 17.814.481 | |
| Minority interest | - | 0 | |
| Total equity | 19.260.310 | 17.814.481 | |
| Non current equity | |||
| Long-term borrowings | 11.169.529 | 10.518.623 | |
| Severance Indemnities | 822.974 | 805.650 | |
| Provisions for risk and charges | 40.029 | 37.831 | |
| Total non current liabilities | 12.032.532 | 11.362.104 | |
| Current liabilities | |||
| Short-term borrowings | 7.560.797 | 5.788.990 | |
| Trade liabilities | 4.805.457 | 6.128.625 | |
| related parties | 557 | 1.407 | |
| Tax liabilities | 531.594 | 414.206 | |
| Other current liabilities | 1.639.418 | 1.542.784 | |
| Total current liabilities | 14.537.266 | 13.874.605 | |
| Total Liabilities | 45.830.108 | 43.051.190 |
| Revenues | 12.930.770 | 9.419.076 | |
|---|---|---|---|
| Cost of sales | (7.883.717) | (5.417.891) | |
| Other revenues | 115.349 | 28.036 | |
| Cost of indirect labour | (883.721) | (547.969) | |
| Commercial expenses | (250.470) | (203.665) | |
| General and administrative expenses | (1.267.166) | (996.240) | |
| related parties | (232.372) | (230.821) | |
| Depreciation of tangible assets | (272.236) | (190.267) | |
| Amortization of intangible assets | (75.198) | (6.857) | |
| Writedowns | (6.245) | (2.500) | |
| Earning before interest and taxes | 2.407.366 | 2.081.723 | |
| Financial costs | (168.412) | (50.776) | |
| Financial income | 129.136 | 147.438 | |
| Earning before taxes | 2.368.090 | 2.178.385 | |
| Income taxes | (695.660) | (638.874) | |
| Profit for the year (A) | 1.672.430 | 1.539.510 | |
| Other comprehensive income/(losses) for the year that will not be reclassified in | |||
| icome statement: | |||
| Actuarial gain/(losses) on DBO (net of tax) | 966 | (535) | |
| Other comprehensive income/(losses) for the year that will be reclassified in | |||
| icome statement: | |||
| Exchange differences on translating foreign operations | (14.759) | 17.165 | |
| Total other comprehensive income/(losses) for the year (B) | (13.792) | 16.630 | |
| Total comprehensive income (A) + (B) | 1.658.638 | 1.556.141 | |
| Profit attributable to: | |||
| Owners of the parent | 1.672.430 | 1.539.510 | |
| Minority interest | - | - | |
| Total comprehensive income atributable to: | |||
| Owners of the parent | 1.658.638 | 1.556.141 | |
| Minority interest | - | - | |
| Basic earning per share | 0,15 | 0,14 | |
| Diluted earning per share | 0,15 | 0,14 |
The Financial Reporting Manager, Mr. Francesco Spapperi declares, pursuant to paragraph 2 article 154-bis of the Consolidated Financial Law, that the accounting information contained in this document, "Interim report at 31 March 2018", corresponds to the Company's accounting documents, books and records.
The Financial Reporting Manager
Francesco Spapperi
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